Bob Buckley: Arbitration favors the deep pockets, not you

Saturday

Jun 7, 2014 at 5:55 PM

A number of years ago, large corporations discovered that there was a legal way of depriving consumers and employees of their constitutional right to a trial by jury. It is called “alternative dispute resolution,” which is just another way of stating that the little guy is not getting a full measure of justice.

How many times do you sign an agreement that provides for arbitration in the event there is a dispute? Many consumer agreements today regarding phone service, cable television service, car sales, or even your employment agreement have arbitration provisions to which you have “agreed.” It's not like you have any negotiating power, because if every service provider dictates it there is no option.

The same is true with most employment agreements that provide that any dispute with the employer must be decided by arbitration. You don't have to agree to this provision, but if you want to keep your job, or get a job, you must agree. The terms of how the arbitration is to be conducted and how the arbitrator is selected are not negotiable and those terms greatly favor the employer and not you.

Missouri law approves of such agreements to arbitrate. In fact, the law specifically states that “if the arbitration agreement provides a method of appointment of arbitrators, this method shall be followed”. Thus, the employer or provider of services usually gets to decide how the arbitrator should be appointed. In most instances, the agreement provides that the arbitrator should be selected by a particular arbitration service. In many instances, it is the American Arbitration Association.

According to the AAA website, it is a not-for-profit organization with a long history and experience in the field of alternative dispute resolution, providing the services to individuals and organizations who wish to resolve conflicts out of court.

I doubt AAA will agree with me, but that last statement is a joke. Rarely will an individual, especially any employee “wish to resolve conflicts out of court.”

Let's say for example that you are a 30-year-old female and a male employee engages in acts of sexual harassment that are reported to the supervisor, but nothing happens except retaliation against the female employee. The employee would have the right to file a charge of discrimination with the Missouri Commission on Human Rights, which is charged with investigating the charge, and then the Commission provides a right to sue letter within a prescribed time. With a right to sue letter, the employee can file a lawsuit in federal or state court.

However, if there is an arbitration provision in the employment agreement, the employee is not allowed to pursue the employer in court. The employee does not wish to resolve the conflict out of court, but instead wishes to pursue her constitutional right to a trial by a jury of her peers. The employer fears the jury process, because it cannot control it, so it provides for binding arbitration in which the agreement provides for the method of appointment. In many instances, AAA provides the arbitrator.

Most arbitrators are lawyers, so instead of having your case decided by a jury of your peers, it will be decided by a lawyer whose services are paid for by the employer. The right to trial by jury is gutted by such arbitration provisions. There is no practical right to appeal the decision of the arbitrator, so a lawyer deciding the facts and applying the law decides your case.

Do you think that is fair?

Often, the same arbitrator will be deciding cases involving the same companies. This is likely the only time the lowly employee will utilize arbitration and the employer will utilize the same arbitration service over and over again. The arbitrator is supposed to be neutral. If the arbitrator relies consistently on employers for business, who do you think they might favor?

Compounding the problem is the fact that this process is conducted in secret in most states. Only in California and Maryland is there any legal requirement that the organization publish its results. In a sampling of cases in the past 10 years involving 52 cases against the same employer, only two were decided in favor of the employee.

Do you like those odds?

Another problem with the arbitration process is that the rules on conducting discovery are slanted in favor of the party that desires arbitration. Access to documents and depositions are limited, unlike in other legal proceedings, and so the large corporation or employer can withhold information and control the release of information.

I have used arbitration voluntarily twice. In both instances, I was involved in a dispute with an insurance company on a personal injury case and the insurer requested arbitration. In both cases, I agreed only because I had input on who the arbitrator was. The advantage of arbitration is that it is usually speedy and cheaper than traditional litigation.

However, the key to both of my cases was that it was voluntary. Most agreements to arbitrate are not voluntary, and the playing field is very much slanted in favor of the party demanding arbitration in the agreement. The courts have enforced these arbitration agreements despite claims that they violate the right to trial by jury. Unfortunately, in many instances, justice is for sale to the highest bidder and the poor consumer or employee is never the “highest bidder.”

Many politicians want to reform the legal system. Most of those reforms are designed to deny or limit your access to court, so to call it reform is oxymoronic. Perhaps the politicians should start examining the arbitration process and give you greater access to the courts. And let's quit deluding ourselves that this process is voluntary.

Bob Buckley is an attorney in Independence. Email him at bbuckley@wagblaw.com